We all know we need a commmunity association reserve study – well, we mostly do, right? However, do we utilize these reserve studies in the way that was intended? Are we USING these reserve studies to plan ahead, research and study possible scenarios?
Proverb - Wiktionary
- a fool and his money are soon parted
None of us wants to be considered foolish, and often, Boards err on the side of micro-managing to avoid looking foolish. So, let’s delve into the possible scenarios for looking foolish in your reserve spending, avoid the possibility of micro-management and develop a reputation for a community that thinks and plans ahead, and leaves homeowners with a sense of security.
There is a process with reserve spending on large projects, and it involves due diligence on the front end and requires that there is a plan, in advance of large expenditures. Here are the steps to avoiding disaster:
1. Go out to bid with a reserve professional, hire said reserve professional at least six months in advance of the budget season, preferably, and have a final draft of the reserve study for your budget preparation.
What is so important in that study? Aside from the current and immediate future fiscal year’s required spending, it is important to look at the coming five years. What are major expenses happening within the next five years? If it involves anything that has to do with a change in the look of the community (lighting, siding, roofing, painting, shutters, etc.), you have several things to decide, which leads us to our next step…
2. Depending on what the community is in need of, there could be one to two years of research involved with a major capital reserve expenditure. Where to even start? Start by asking questions. Even a survey of the Board members, management company, reserve professional and perhaps, the auditor, is a good idea. Gather the answers that each of you THINKS is the correct answer, and together you will develop the actual answer. Below is a list of things you need to start considering. This list is not exhaustive, but it will get you started.
3. After asking questions of your professionals and those that live within your community, it is time to consider the process – who is going to be helping, how much will it cost, and what options exist?
4. Whom do you need to hire?
5. How much money do you need to get where you want to be?
Do you need a loan? Time to talk to local bankers that are very happy to tell you about the tons of products they have for community associations.
Keep in mind that all of the above is being done before you have even started interviewing professionals that may end up doing this work. Remember that they may also have suggestions, so finding a trusted partner may bring about additional changes.
Treat your community association as something fluid that can change with the times. If this process is employed correctly, the result will be a well-thought-out, a complete plan that could incorporate changes that will increase property values, including potential safety concerns and incorporate a better way of life for your community members.
Final recommendation? Have fun! Honestly, this process should be exciting and fun, if considered early enough. Have town hall meetings to explain your plans. Write newsletter articles about your plans, well in advance. Informed membership means happy membership. Finally? Good luck!